Feb
28
The iPhone Cometh
Posted by Clif Burns at 7:33 pm on February 28, 2012
Category: BIS • Criminal Penalties
ABOVE: Online Micro HQ
Last week the Bureau of Industry and Security released Settlement Agreements it entered into with Massoud Habibion, Mohsen Motamedian, and Online Micro LLC in connection with computers exported to Iran through an intermediary in the UAE. Online Micro and Habibion agreed to suspended ten-year export denial orders with no fine. Motamedian agreed to a $50,000 fine with no denial order.
The charging papers for Mr. Habibion once again reveal the real reason for the so-called outreach visits by BIS personnel when it noted that Habibion “knew” that the exports required a license because
BIS Special Agents conducted an outreach visit to Habibion in January 2010, during which the Special Agents informed Habibion that unlicensed exports of computers to the UAE with knowledge that the ultimate destination of the items was Iran constituted a violation of the Regulations.
As I’ve said before, don’t permit BIS agents to conduct an “outreach” visit at your company without your lawyer being present because if something ever happens down the road they are going to say that they informed you it was illegal during an outreach visit. You also can politely decline outreach visits.
Of course, there’s more to this story than the BIS civil charges which were simply piled on top of criminal charges here. According to a DOJ press release, Messrs. Habibion and Motamedian pleaded guilty to criminal charges related to the export of the computers to Iran. One interesting detail sticks out in the press release. Apparently, the computers that were sent to Iran were Dell computers. When people in Iran started calling Dell on service issues, the company conducted an investigation which led back to Online Micro and its principals. Moral of this part of the story: if you’re going to sell stuff illegally to Iran, sell stuff that doesn’t break down.
But wait! There’s even more and it involves a nasty divorce, a wife seeking revenge and an iPhone. Some of the government’s evidence consisted of allegedly incriminating entries on Mr. Habibion’s iPhone. According to an unintentionally, but irresistably, amusing pleading filed by Mr. Habibion’s lawyers, the phone was grabbed from Habibion’s wife at a school function for their daughter. She told him that she had “thrown it down a canyon” so that rather than changing the password on the phone he just got a new one. Habibion’s wife then turned it over to ICE after it had been downloading Mr. Habibion’s emails while connected to WiFi. The defense also claimed that Habibion’s wife added false information that would incriminate him in the prosecution. For good measure they also claimed that the notes in the iPhone which allegedly revealed sexual philandering by Habibion with both males and females were forged by Habibion’s wife for benefit of the divorce proceedings. Second moral of this story: make sure you have a happy home life before shipping a boatload of computers to Iran.
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Copyright © 2012 Clif Burns. All Rights Reserved.
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10 Comments:
Clif,
There is a significant omission in your first paragraph: the 10-year denial orders for Online Micro and Habibion were SUSPENDED, meaning that they are NOT denied export privileges so long as they do not commit further violations of the EAR for the 10-year probationary period. This distinction between an actual and a suspended DPL listing is unfortunately blurred by the manner in which the standard BIS settlement documents/order are worded and organized (something BIS should be persuaded to correct); and, no doubt, the general public conducting a Google search of a prospective business partner is not always so careful in parsing words for these fine but critical distinctions; however, the difference can mean everything to defendants who negotiate and enter these types of agreements in the hopes of eventually putting their lives and businesses back together. As such, it is especially unfair to attribute to them a penalty far in excess of what they in fact received.
Rich
He was exporting computers to the United Auto Workers?
(“during which the Special Agents informed Habibion that unlicensed exports of computers to the UAW…”)
Is that a typographical error, or did BIS actually write “UAW” instead of “UAE”?
It was a typo for UAE, now fixed. BIS “protects” the pdf documents on the charging site so that cutting and pasting of text is not permitted. Apparently they are concerned about being quoted. So the typo was introduced when I had to retype the portion of the charging document that I was quoting.
Thanks, Clif! Do you know of any compelling reasons NOT to decline an outreach visit? Would doing so put an organization at risk? Just curious.
While there may be a colorable argument that BIS has the authority under IEEPA (50 USC 1702(a)) to impose a denial order on any foreign party, BIS has no authority under the IEEPA peanlty section (50 USC 1705)to impose a denial order on US party as a sanction for violating the EAR. The Administrative Procedures Act, 5 USC 558(b), provides that “A sanction may not be imposed or a substantive rule or order issued except within jurisdiction delegated to the agency and as authorized by law.†There is no “foreign affairs function” to this section of the APA.
Unlike the long expired EAA, IEEPA 1705 makes no mention of denial orders as a sanction.
Furthermore, some pre-APA Supreme Court cases clearly state that administrative agencies may not, as a matter of due process and separation of powers, impose sanctions unless Congress has delegated that authority. Therefore, imposition of denial orders on US persons as a sanction is itself a violation of statutory law and the Constitution.
I don’t agree with the statement advising against letting BIS Agents in for an Outreach visit. They are required to visit X amount of companies per year. I would think that companies would much rather have a working relationship with them vs. alienating them. They will provide informational handouts that while availale on their website are often ignored. I know of employess who after reading the “Don’t Let This Happen To You” realized their company was committing violations and was able to file a VSD instead of facing much graver penalties if they hadn’t. Additionally, wouldn’t we expect a legit company to want to be aware of export issues and schemes to help thwart criminal operations?
I would agree if it weren’t the case that these outreach visits were cited again and again in penalty cases as “proof” of knowledge. Companies would do much better to spend the money to send employees to compliance training. The “Don’t Let This Happen To You” brochure can be downloaded from the BIS website and passed out by the company itself without fear of collateral consequences. Agenciies that have the power to fine millions of dollars should not be let in the door without a warrant or your lawyer present or both.
Thank you.
